Carbon Reduction Commitment User Guide issued

Defra has today released a user guide for the Carbon Reduction Commitment, which will operate from April 2010. The Carbon Reduction Commitment is designed to tackle CO2 emissions not already covered by Climate Change Agreements and the EU Emissions Trading System. It aims to help reduce the country’s carbon footprint to deliver the ambitious emissions reduction targets set in the Government’s Climate Change Act. It is a domestic cap-and-trade scheme for public and private sector organisations that use more that 6,000MWH of energy per year – equivalent to an energy bill of about £500k – and have half hourly metering.

Originally it was stated that only 5,000 or so organisations would be impacted, but this has now been revised to 20,000 – so many who considered themselves to be exempt could now fall into the programme when it begins in April 2010.Under the scheme, companies must purchase allowances depending on how much carbon they intend to emit – initially at a fixed price predicted to be £12 per tonne. Eventually the total number of allowances available to purchase will be capped, to provide a mechanism to drive down energy consumption, and the carbon price will float. Savings of £1bn in energy costs by 2020 are projected for the participants, but those who don’t curb their emissions will be hit by penalties including monetary fines and a poor ranking in the scheme’s league table. Those who top the league tables will receive financial incentives.

The Carbon Reduction Commitment will be phased in between 2010 and 2013 and although capping will not apply until allowance auctioning starts in 2013 it is widely accepted that adapting early to the legislation offers both financial and reputation benefits. You can opt-in to updates from Defra here.